Racial Discrimination in Mortgage Lending

The Washington Post yesterday reported on a new study released by the Federal Reserve which details the realities of racial discrimination in mortgage lending in the U.S. According to the Fed’s report:

… minorities received loans with higher interest rates or other increased charges in greater percentages than white applicants did. Controlling for various factors, the report found 30.3 percent of the loans for home purchases by African Americans were higher-cost loans, compared with 17.7 percent of loans for whites. The gap of 12.6 percentage points exceeded the gap of 10 percentage points found in the 2005 survey.

Black borrowers received high-cost loans 52.8 percent of the time when they refinanced home loans last year, vs. 49.3 percent in 2005, the Fed report said. Hispanic borrowers received high-cost refinancings 37.7 percent of the time, up from 33.8 percent in 2005. The rate for white borrowers was 25.7 percent last year, compared with 21 percent in 2005.

The Federal Reserve report coincides with increased scrutiny by Congress of lending practices that contributed to the collapse of the subprime-mortgage market which is having a disproportionate impact on African American and Latino homeowners (but that goes largely unreported in this story). And, while the Washington Post story goes on to note that:

African Americans’ homeownership fell nearly two percentage points in the first six months of this year, to 46.3 percent, compared with a half-percentage point drop for whites, to 75.4 percent.

There is little to no attention to the racial discrimination in mortgage lending on the part of Congress. Perhaps it’s time for Congress to take pay attention? Given that the Democratically-controlled Congress can’t seem to get it together to pass legislation that would stop a widely unpopular war, I won’t be holding my breath to see if they take up the issue of racial discrimination in mortgage lending. Of course, the other point to make about the Federal Reserve point is that it calls into question the kind of story I commented on yesterday in USA Today, that this is a “more tolerant” nation. If survey data reflects less overt racism, yet institutionalized racism is as deeply entrenched as this data suggests, who benefits from this? Arguably, it’s white people who reap the benefits here, both in terms of getting better mortgage rates and simultaneously congratulating ourselves on being more tolerant.

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